The Evolution of Aviation in World War I and II Essay Example for Free

The Evolution of Aviation in World War I and II Essay Because of urgent needs, aviation evolved rapidly in the First and Second World War. It was in the First World War that air fights occurred upon the development of fighter planes and that aerial bombings were carried on by bomber planes. Along with the invention of fighters and bombers was an innovation in design of airplanes for increased speed and capacity for higher altitudes. The Second World War saw the continued evolution of aviation, still geared upon increased speed and capacity for higher altitudes. What was the main difference in the first and Second World War was the development of the turbojet engine as an alternative to piston-engines. Radar was also used in aviation for the first time in the Second World War. This paper will discuss how aviation evolved in the First and Second World War. It will also explore the major differences in Research and Development during those era. II. Aviation in World War I When countries of Europe entered into a conflict that was called the First World War, airplanes and airships were already popular inventions. Prior to the conflict, these flying machines were primarily used for transport. Also there was air competition, specifically regarding design and speed, that were participated by many European countries and winners were awarded with money. However, some countries had also seen the military potential or usefulness of these flying machines in war time especially for reconnaissance or spying (Murphy, 2005, p. 33). And when European countries embraced the devastating First World War, airplanes and airships were put into good use. In the early days of the war, airplanes and airships were utilized extensively for reconnaissance. Airplanes were not primarily thought as weapons for warfare. In fact, the condition of military aviation in most countries when the war broke was only in its infancy stage. It was Germany who owned the largest operationally deployed aircraft but it was France who produced the best quality and had the largest aeroplane manufacturing base (Cowin, 2000, pp 8-9. ). Although Russia was also technologically advance in terms of air power, it lacked the industrial infrastructure to develop its aircraft needs. The United States on the other hand, although the first to develop the ‘heavier-than-air† flight in 1903, was slow in advancing its air technology (Murphy, 2005, p. 34-37). Reconnaissance was a very important part of military strategy in the war. Airplanes and Zeppelins (German airships) were used for long-range spying. Reconnaissance involved the photographing of fronts and scouting to see the movements and weakness of the enemy troops and to also keep track of where one’s own troops were already at after launching. Commanders used all reconnaissance information for their battle plans (Murphy, 2005, p. 50). The effectiveness of reconnaissance helped to change aviation history. It was the success of aircraft reconnaissance that contributed to the stalemate of warring nations as war progresses. In this connection, reconnaissance aircrafts became targets of new high powered ground weapons. Nations therefore had to make a way to protect their reconnaissance aircrafts. Moreover, trench warfare also called for an immediate action to prevent the enemy from conducting aerial spying ( Murphy, 2005, p. 48). These situations gave rise to the development of mostly biplanes (two winged) fighters and bombers. Consequently the development of fighters and bombers results to design innovation of the airplane (Murphy, 2005, p. 48). Pilots used pistols and rifles for firing especially in dogfights were flying fighter planes exchanged bullets at each other. However, it was not an effective weapon against a moving target. Designers had thought of installing the newly invented lightweight machine guns instead. Earlier, inventors had observed that it is more effective to fire a machine gun through the arc of the propeller using a tractor driven aircraft (plane propeller at the front) so that pilots can use the airplane for aiming. Pusher planes (planes that have propellers and engine at the rear) may seem advantageous at first in that the machine gun can be put at the nose of the plane however this left the rear of the plane vulnerable to attack and also it was hard and slow to maneuver. There is danger, however, in tractor driven aircraft in that the bullet may hit the propeller and strike the pilot or damage the engine. To solve this problem, a Dutch aircraft designer, Anthony Fokker, developed a synchronized machine gun in his monoplane called the Eindecker. It works by synchronizing the interrupter gear with the camshaft so that the interrupter gear could be timed to prevent the gun from firing at a moment when a bullet would strike a propeller blade (Murphy, 2005, pp. 52-54). The bombers, on the other hand, were developed out of a strong desire to strike behind enemy lines and to cripple their capacity and will to fight. In the early days of the war, the Germans had attempted to use their Zeppelins for bombings but it was extremely vulnerable to ground fire. In fact, they lost three Zeppelins by the end of August 1914 alone ((Murphy, 2005, p. 48). Other innovations in the design of the airplanes were also called for to gain advantage over the enemy. In fact, at the end of the First World War, the airplane had undergone rapid physical renovation that it bores little resemblance to the â€Å"frail wooden and cloth war birds that had entered the war† ( Eckert , 2006, p. 58). Prior to 1914, most planes were designed after the Wright Flyer with control surfaces in front of the wings for a canard type or having wings that were shaped like birds or pigeon type. In this prewar model (or birdman era), the fuselage and the wings were made from plywood covered with fabric and held together by string to meet the requirement of achieving the least possible weight for the entire structure in â€Å"heavier than air† flights. The replacement of thin airfoils with a self-supporting cantilevered wings held in place by struts and wires was an important innovation to reduce air resistance and increase speed along with strong motors. The influence of the wingspan and shape of wings were also studied. Before long the airplane evolved into a full metal construction, example, the Junkers F-13 (Eckert, 2006, pp. 58-59). Another innovation in aviation was in increasing speed and rising at high altitudes to avoid being shot down by the enemy and to carry heavy loads of bombs. It calls for a remarkable advance in the power of the engines. At the beginning of the war, most of the engines were of about 50 horsepower and the aircraft flew at 70 or 80 miles per hour and rising around 10,000 feet only (Cowin, 2000, p. 9). By the end of the war, some planes were powered by engines of more than 300 horsepower. Fighter planes could travel at 140 to 150 miles per hour and rising at 30,000 feet (Cowin, 2000, p. 84).

home school Essay -- essays research papers

Home schooling is another way for a child to receive his or her education. It is one of many alternatives to regular schooling (classrooms and schools). It is the oldest alternatives to regular schooling and one of the most effective. There are many true stories proving that home schooling is an effective and often successful way to teach you child. But first lets talk about home schooling began in the U.S. Home schooling started in colonial America, (around 1777 to 1783) for most colonial homes, home schooling was the only thing available. According to the Texas home school coalition, our founding fathers had a strong conviction that children should be able to read for the very important reason of reading the Bible for the spiritual benefits and truth it contained (Texas home school coalition 1997). Sometimes parents would hire a tutor to teach their children subjects in which they did not feel qualified (Texas home school coalition 1997). It wasn’t till later that education developed into religious training in the universities in the Ivy League. These universities were strictly there to train ministers. According to the THSC (Texas Home School Coalition), the entrance requirements often included being able to read and translate Hebrew, Latin, and Greek. Eventually, communities and states began to establish schools funded by the government however, these schools still had a strong religious up bringing. Home schooling has been around for a long time. But most people won’t know the steps it takes to successfully home school a child. But, to fully understand these steps one must first learn the basics of home schooling. Home schooling means to teach or be taught at home. Home schooling is to teach children at home, or be taught at home rather than in the public school system, using an approved curriculum. Of course the parents have to have a degree to teach their children (except in New Jersey). According to the New Jersey Education laws all high schools in New Jersey will accept students who were taught by their parents. The parents have to bring proof of the child’s progress and the names of the textbooks the child has used (NJ Education Laws 1). I do not think many colleges can accept students that went through home schooling at a high school level. These laws differ from state to state. California's Department of Education maintains that you can't hom... ...com. 2002 30 Mar. 2003 Rasicot, Julie. â€Å"College without a campus.† Good Housekeeping. Sep. 1997: p156 Academic search premier. EBSCOhost. Middlesex County College Library, Edison. 20 Mar. 2003 Texas home schooling coalition. â€Å"A home school history lesson.† Texas Home Schooling Coalition. 1997 3 Apr. 2003 Kendler, KS. â€Å"Social Phobia† Psychology Today. 1995 3 Apr. 2003 Wilkes, Byron. â€Å"If all you have is a hammer†¦can you build a solid foundation for your child’s learning?† The Old House. 2000-2003 Hallowell, Edward M. â€Å"What I’ve learned from ADD.† Psychology Today. May/Jun 97 15 Apr. 2003 Ray, Brian D. â€Å"Home Schooling: The Ameliorator of Negative Influences on Learning?† PJE: Peabody Journal of Education. 2000 Academic search premier. EBSCOhost. Middlesex County College Library, Edison. 15 Apr. 2003 New York Education laws. â€Å"NY education code for homeschooling.† Gomilpitas.com. 2002 16 Apr. 2003 California’s Education laws. â€Å"NY education code for homeschooling.† Gomilpitas.com. 2002 16 Apr. 2003 Bruner, Kimberly. â€Å"Homeschooling: A natural.† Countryside & Small Stock Journal. 2001 Academic search premier. EBSCOhost. Middlesex County College Library, Edison. 15 Apr. 2003

Poverty and Pollution Essay

Determine the ethical implications of business polluting in third world country. Explain your rationale. The Third World refers to the poorer and undeveloped countries of the world. Often, these countries have extremely poor environmental situations. Countries in Latin America, Eastern Europe, Africa, and Asia are the greatest victims of this environmental inequality. In addition to problems created by development and industrialization, poorer nations also suffer environmental difficulties caused by poverty and war, among other causes. Many environmental problems arise in the Third World. Air pollution, water pollution, deforestation, desertification, soil erosion, and poisoning of the environment are among the largest of these. (pollution problems on third world , 1999) The businesses that are polluting in a third world country are the businesses that think that because the third world countries are poor and under developed. They do not have the restriction that the U.S. does to prevent business from doing everything that they can to the environment, These countries are left with making decision on whether are not to eat are having clean environment. What do you think they are choosing to do? We sometime take advantage of people because of the situation they are in at the time. The Western countries take advantage of these Third World countries. They dump their trash and other hazardous waste into these Third World countries. The First World companies will go into these countries and build plants, which will pollution the air, in Third World nations to not have to deal with the regulations that they would face at home. Some of the transnational corporations that produce hazardous chemicals look at as overly dangerous in the First World find an acceptable market in the Third World. There, governments cannot restrict usage of these chemicals. They are trying to provide a way for its citizens to make a living. How can this be fair? How can these business live with themselves. What I have stated time and time again it always comes back to money. Suggest the reasons a business may conduct operations in a third world country and disregard any standards of pollution control. We see the pollution problem affecting the whole world. Industries are going overseas because the cost of labor is a lot cheaper. Therefore all they want to do is make a big profit by paying less and acquiring quality goods and services. (pollution problems on third world , 1999) Industries don’t care about the employees never the less about the environment. Laws and regulations a lot different in third world countries and there is a lot of corruption too; with this been said if anyone complaints money is the solution. Also as I mention before countries of the Third World struggle with population growth, poverty, famines, and wars, their residents are discovering the environmental effects of these problems, in the form of increasing air, water, and land pollution. Industrialized nations often dump wastes in developing countries where there is little or no environmental regulation, and governments may collect considerable fees for accepting their garbage. And not only that some of this garbage can be hazards not only for the environment but to the individuals leave close to this dump sites this third world countries would accept garbage for money this is hard to believe. This industries move to third world countries because there is not pollution controlled laws. Therefore industries are not allowed to manufacture of produce certain things their only option is to move if they want to still be in business. (gale, 2005) It has been said that pollution is the price of progress. Assess the connection between economic progress and development, on the one hand, and pollution controls and environmental protection, on the other. The optimal level of pollution is supposed to be the level at which the costs to the company of cleaning up the pollution equal the cost of environmental damage caused by that pollution. If the pollution charge is equivalent to the cost of environmental damage then the theory says that the company will clean up its pollution until any further incremental reduction in pollution would cost more than the remaining charge, that is until it is cheaper to pay the charge than reduce the pollution. This might seem to be less than optimal solutions to the community but economists argue that the polluter is better off than if it had paid to eliminate the pollution altogether and the community is no worse off because it is being compensated by the firm for the damage through the payments to the government. In theory the payments made by firms in the form of charges can be used to correct the environmental damage they cause. (beder, 1996) Support the argument that human beings have a moral right to a livable environment regardless of the country they live in. Every person in every community has the right to health, and to a safe and healthy environment. Unfortunately, these rights are often not respected. Many people suffer from serious health problems caused by a scarcity of basic necessities and an excess of harmful substances. The most vulnerable people are those who have low status because of race, ethnicity, religion, gender, class, caste, poverty, or for other reasons. They usually suffer first, and worst. The struggle to live in a healthy, safe, productive, and enjoyable environment by communities whose rights are not well respected by people in power is sometimes called the struggle for environmental justice. As part of the human rights; each human being has a moral right to life and to a livable environment. Also is not fair for these individuals from third world countries to suffer from more things they’re already struggling and then u have industries polluting their environment. Everyone should be able to have a good environment to live in. Also something that caught my attention is the even though here in the United States of America we have good environment individuals don’t not how to take care of it. For example people throwing garbage out their cars windows or disposing of chemicals in their back yard. This types of thing can cause damage to our environment. Take a position on whether nations have an obligation to provide poorer nations with, or help them develop, greener industries and sources of energy. Explain your rationale. Although some of this nations are poor they can also be rich because of natural resource for example oil, gold and expensive minerals. Many third world countries have been able to be successful because of natural resources. I think that if a nation is wealthy and individuals are happy, then it should help other nations because today for them and tomorrow for us. We never know when we are going to need someone’s help. Therefore it is not an obligation to other nations but it’s good to show support. The United States of America is known for helping others but I know there is always an interest or a agreement to repay the USA. Also increasingly, through globalization, many countries have become dependent on each other. While some countries are endowed with better quality resources, others have to be satisfied with current resources. History has shown that the poorer countries are usually those more vulnerable to disasters (economically and socially) and are less equipped to overcome these disasters. Rich countries, therefore, are consistently required to support those poorer countries through international aid. However, the right type of aid is more important than the quantity of aid. Rich countries should invest in the human capital of poor countries, provide defense against wars, and help develop the skills of the people instead of simply providing donations. There should be agreements and follow-ups on how the aid is being used. Propose a plan for uniform global pollution control standards and how you would enforce them. It’s hard to say how something can be done about this the procedures and norms are in place now. I think pollution is always going to be an issue and it’s going to be too late when individuals try to help with the problem. The only thing I can suggest is to maybe have dump sites in out of space and if the garbage tries to enter earth of other planet it would burn anyways. But to enforce new regulation it’s going to be a challenge hopefully they can come out with a solution soon. Industries are not going to stop producing thing while the demand is high. And if we told inviduals that this is harmful for the earth that they need to stop they would just laugh References Pollution problems on third world . (1999). Retrieved from http://library.thinkquest.org/26026/Economics/pollution_problems_in_the_thir.html Beder, S. (1996). charging the earth: the promotion of price- based measures for pollution. Retrieved from http://www.herinst.org/sbeder/enveconomics/economics.html

Wealth effect of International Investment Announcements - Free Essay Example

Sample details Pages: 18 Words: 5442 Downloads: 2 Date added: 2017/06/26 Category Finance Essay Type Analytical essay Did you like this example? This paper examine on wealth effect of shareholders from the international investment announcements made by Malaysia Multinational Corporations (MNCs) listed at Kuala Lumpur Stock Exchange (KLSE). The project is using quantitative method (standard event-study methodology) and announcements in the year of 2002 are used. The result shows that international investment announcements create positive significant wealth effect for main board firms in KLSE. Don’t waste time! Our writers will create an original "Wealth effect of International Investment Announcements" essay for you Create order For second board firms however, the market does not react directly towards the foreign investment announcements. In short, unexpected cross border investment announcements do contain new relevant information and market does react on it. Market saturation theory also suggests that foreign investments may help firm to improve competitiveness and profitability. Besides, the larger capital size of main board firm makes the market to be more confident and optimistic on overseas investments announced by main board firms rather than second board. CHAPTER 1 INTRODUCTION Background of the Study The study focuses on the markets reaction towards international investment announcements made by Multinational Corporations (MNCs) in Malaysia. According to Eun Resnick (2004), a multinational corporation (MNC) is a business organization incorporated in one country but has production and sales operations in at least one foreign country. Similarly, based on Franklin (1973), MNC is a business firm that consists of a parent company that produce and market in foreign countries; with the flow of products, services, capital, technology, management, and funds among them. As shown in many studies, the stock price reactions towards foreign investment announcements in developing market produced uncertain results. Some studies showed positive market reactions towards international investment announcements but some may not. For instance, Lummer and McConnell (1990) proved that US firms foreign joint ventures have a positive return especially when the venture partner is a foreign firm as co ntrasted to a foreign government. Moreover, Ahmad Etebari (1993) stated that joint ventures between US firms and Eastern and Central European Countries yield a positive valuation effect for the participating US firms. Besides, there is a study that showed international acquisition provides abnormal positive returns to target shareholders (Ike Mathur and Nanda Raugan, 1992). However, some studies shows negative market reaction towards the announcements. Thomas H. S. Ghassem H. (1990) indicated that there is a small magnitude of negative stock price reaction to foreign investment announcements. Similarly, Albert C. Alireza T. R. (2000) tested on the wealth effects of international acquisitions using a sample of foreign acquisitions by Dutch firms during the period 1990 to 1996 and found weak evidence on wealth creation of the activities, especially for the acquisitions in the US. There must be some reasons that attract firms to go abroad. Alex O. W. (1982) discussed that the f undamental of international trade is the difference in cost of goods produced in different countries. Different natural resources (such as land and mineral), capital (technology), and labors will have different prices in various countries. Referring to Eun C. S. Resnick B. G. (2004), firms can locate production in any regions in the world to maximize performance and raise funds in market where the cost of capital is the lowest. International investments also enable firms to diversify risks compared to only investing locally. More significantly, based on David Ricardos On the Principles of Political Economy and Taxation which introduced the concept of comparative advantage and this concept further convinced firms to go abroad (Franklin R. R., 1994; Eun C. S. Resnick B. G., 2004; Alex O. W., 1982). According to Ricardo, it is mutually beneficial for firms to produce and specialize in goods that they can produce most efficiently, with the least costs compared to other firms. Then, it is advisable for firms to trade goods among themselves, even if situated in different countries. For example, a firm in France produces wine most efficiently, whereas a firm in England produces textiles with the best efficiently. If they both specialize in their respective products and trade it with each other, the combined production of the two goods will be increased compared to if they choose to produce the products individually. Through international investment, MNCs can achieve economy of scale faster (Eun C. S. Resnick B. G., 2004). First, it can be done by spreading the R D expenditures and advertising costs over the global sales. Besides, firms can also pool their global purchasing power over the suppliers, thus enabling them to purchase raw material at lower prices. Technology can be used with minimal additional costs too. MNCs are also able to get cheaper labor compared with their parent company in certain countries. Nevertheless, there are also some arguments on the negative effects of firms international investments. Madura (2000) discussed that managements might be unfamiliar to foreign cultures when they expand internationally. These culture barriers may offset the gains from the international expansion. Management needs to know and understand foreign cultures, for instance, Germans only discuss business dealings in the meeting room, but never during meals. Furthermore, Jensen (1986) said in his free cash flow theory that managers may sometimes be involved in over-investing in some unprofitable foreign ventures in order to expand firms empire and obtain prestige. The investments will eventually shrink the value of the parent companies. In addition, MNCs are exposed to foreign exchange risk that they would not encounter in purely domestic transactions (Eun C. S. Resnick B. G., 2004). For example in December 1994, the Mexico peso depreciates drastically against US dollar. Consequently, the price of US imported goods will increase in Mexico as it needs more pesos to buy $1 US dollar. Similarly for Asian currency crisis 1997, if a US firm with major export market like Indonesia, Malaysia, or Thailand, the same difficult situation will occur. Another drawback from international investment is the political risk involved (Eun C. S. Resnick B. G., 2004). The risk arises from the changes in tax rules or inconsistency in policy implementations by foreign governments. For illustration, in 1992 Enron Development Corporation spent nearly $300 million on the project to build a largest power plant in India. However, it was then cancelled in 1995 by the politicians. This showed how difficult it is to maintain contracts and investments in foreign countries under the influence of politics. Malaysians MNCs Performance There are three forms of foreign investments: acquisitions and joint venture with existing companies in foreign countries, and opening new subsidiaries in foreign countries (Madura, 2000). To study the market reaction of Malaysians MNCS on international investment, this study focuses on Kuala Lumpur Stock Exchange (KLSE), one of the fastest developing and largest rising securities market in the Asia Pacific rim (Annuar and Shamsher, 1992). A survey has been conducted by Bala (1999) on 436 firms (as at October 1997) listed on KLSE to recognize MNCs originating from Malaysia. Eventually, he discovered 207 firms are actively involved in international investments. Appendix A shows spread of Malaysian MNCs Foreign Investments according to Region. Despite the negative effects on foreign investments discussed, Malaysian MNCs spread all over the world; carrying out international trades in countries such as United States, Europe, Australia and so on. From Bala (1999) survey, 17 firms are discovered to have more than 20 ongoing international investments overseas. Also, from appendix A, we discovered that North East Asia and the ASEAN countries received the most of Malaysians investments. The technology advancement of Malaysia had somehow deterred Malaysia firms from undertaking into western countries and competing with the firms with much sophisticated technologies in those countries (Lall, 1986). According to Bala (1999), Sime Darby has the most number of foreign investments, which are 110 foreign activities in 19 countries. The second place goes to Amsteel with 70 ongoing foreign investments, and thirdly is MBF Holding with 60 such activities. The number of MNCs in Malaysia has increased over the year, according to Annuar et. al (1996). In fact, any information about the investments overseas is publicized according to the KLSE listing requirement. Thus, the foreign investment news is relevant to the reactions on these announcements in Malaysian MNCs. A s shown by David and Qian (1997), firms anticipate positive returns on the foreign investments or else they will not involve in the activities. Therefore if the previous performance of Malaysia MNCs on investments overseas is good, it will encourage more of such investments. Moreover, if the stock price shows positive returns during the particular announcements dates, it directly means a positive reaction from the market. It also presented a good performance of Malaysias MNCs on such investments. A successful international investment will also increase firms profit; and thus generate wealth to the shareholders. Problem Statement The study focuses on the Malaysia Multinational Corporations (MNCs) listed at KLSE. Previous researches showed that International investments announcements by MNCs are significance to the market, some showed positive and some showed negative market reaction. There must be reasons for firms to invest overseas. If foreign investments do not produce preferable results for the company, there is no point for firms to go abroad. This paper will focus on determining the wealth effects on international investments announcements by Malaysia MNCs. Also, the capital size of MNCS (whether main or second board) will be investigated in the effectiveness to produce market reaction on their foreign investment announcements. Objectives of the Study This study is to determine the wealth effects of foreign investment announcements in developing market. Research Questions What are the wealth effects of foreign investment announcements in developing market? CHAPTER 2 LITERATURE REVIEW 2.1 Foreign Direct Investment (FDI) FDI is the investment that gives investor a controlling interest in foreign company and any way of increasing international business that requires a direct investment in foreign operations (Daniels, Radebaugh and Sullivan, 2007). Here, Madura (2006) states those foreign direct investors are not hoping to gain profit from foreign investments, but also consider expanding their businesses in foreign country and the exchange of operation and management skills. McManus (1975) however, finds FDI is possibly in industries with considerable interdependence among producers across nations to lessen transactions costs and to assure the internalization of the net ownership rents. According to Edward R. B. et. al. (1997), entry transactions are classified into three modes that we define as mergers and acquisitions, joint ventures, or subsidiary investments and plant expansions. However, Beamish Banks (1987) and Tang Yu (1990) state that traditional entry mode usually is on wholly owned subs idiaries. Besides, joint ventures may sometimes be preferred over wholly owned subsidiaries because the costs are much more easily controlled. According to Gomes-Casseres, B. (1990) on the other hand, firms entering foreign markets for productions prefer structures that minimize transaction costs of doing business. In contrast, actual ownership structures that arise ex post depend on the bargaining power of the entering firm relative to other existing firms and governments. Bhaumik and Gelb (2004) explain some advantages that MNCs will get from overseas acquisition. First, MNCs can reduce or eliminate the cost of gathering resources together to build a firm. Moreover, MNCs can gain knowledge about the local markets and institutions and the business relationships. Furthermore, it facilitates MNCs to keep their own management and operation skills and the control of their existing technology. Acquisitions also cause MNCs to bear the cost of integrating the production structure, orga nizational structure and corporate culture of the acquired firm into its own. Joint venture however, is pooling of assets in a common and separate organization by two or more firms who share common ownership and control over the use and returns of these assets (Kogut and Singh, 1988). In this entry mode, two parties agree to contribute their equity to form a new entity and undertake the economic activity together. Revenues, expenses and the control of the enterprise will be shared from business. 2.2 Factors of FDI Considerations Edward R. B. et. al., (1997) states some of the factors for foreign investments to occur. One of them is government nonmarket incentives that twist the normal functioning of local supply and demand patterns. Besides, non-governmental imperfections and situational factors also impact upon foreign firm entry decisions. Informational and distribution inefficient markets that fail to perform proper signaling and rationing functions and leading to foreign capital entry and exit behaviors also contribute to FDI activities. Bany and Fauzias (2006) however, urge that market reaction is different for developed and developing countries. It is because developed countries have higher skills of management and technology and stable economical and political conditions. Developing countries on the other hand, always refers to a country with lower capital, possesses lower technology level and lower standard of living. It becomes a competitive advantage for Malaysia MNCs to invest in developing c ountries due to the lower technology skills of the local companies. The business culture in developing countries is also similar to Malaysia, thus it is easier for Malaysia MNCs to compete successfully with local firms. It is statistically proved that the significant result on FDI announcements is only because of the technology advantage of Malaysia MNCs (Bany and Fauzias, 2006). It is also found that for international JV, the wealth gains are found to be influenced by the size of the firms; the smaller the firms, the higher the gains. Besides, industrial sector of the firm also affects wealth on international JV. In addition, unincorporated JV is also believed to provide higher gains on investments (Janakiramanan, Lamba Seneviratne, 2005). Nevertheless, there are risks to be considered before firms opt for FDI. Country risk is one of the considerations (Madura, 2006). There are two main country risks: political and financial risk. Political risk includes attitude of customer s in the host country, actions of host government, blockage of fund transfer, currency inconvertibility, war, bureaucracy, and corruption. Financial risk however, is the current and potential state of the countrys economy; for example interest rate, exchange rate, and inflation rate. Another type of problem is related to agencies, also called as dissemination risk; which is the main problem for international joint venture. Dissemination risk refers to the extent to which a firms intangible assets like marketing and production technology are likely to be mimicked by competitors (Edward R. B. et. al., 1997). In the context, JV can lead to a transfer of the intangible asset or technology owned by the MNC to the local partner, whether accidentally or intentionally (Bhaumik and Gelb, 2004). Always, acquisition and JV allow access to the firm-specific like assets in the host countries (Duarte Canal, 2002). Under this condition, the agency problem will occur and the relationship betwee n partners will dissolute within a relatively short period of time (Sinha, 2001). If dissemination risks are large, entering firms will choose to purchase wholly-owned subsidiaries, expand existing capacity, or acquire assets of local entities rather than contracting through joint ventures or licensing arrangements (Edward R. B. et. al., 1997). 2.3 The Wealth Effect of FDI Announcements There are various researches and studies on market reactions based on different announcements. For example Masulis (1980), Ball Brown and Finn (1977) on capital structure changes; Bradley, Desai and Kim (1988) on merger and acquisitions; Scholes (1972) on common stocks right issues; and Chan, Gau and Wang (1995) on business relocation. This paper will focus on the wealth effect of international investments announcements. Similarly in terms of technique, Annuar and Shamsher (1992, 1993) analyze the effects of stock splits and rights issues announcements on share prices in Malaysia. As a result, these announcements create reactions in the market and produce positive abnormal return to the investors. Thus, it is believed that foreign investment announcements are alike to those announcements and they will create market reactions. The market price should change upon the release of such information. In Malaysia, Bany and Fauzias (2006) proved that market react positively and significa nt to the shareholders on the foreign investment announcements. In US, Etabari (1993) prove that the reaction of US stock price towards 25 international joint ventures announcements between US firms and firms in Eastern and Central European countries reacted positively towards the announcements. Moreover, McConnell and Nantell (1985), Mohanram Nanda (1998), and Johnson Houston (1999) also show that stock price of US firms reacted positively towards the international JV announcements. Next, Lummer and McConnell (1990) verify that foreign joint ventures for US firms produce positive return as the joint ventures are viewed from value enhancement. It was also discovered that the stock price reacted positively significantly, especially when the venture partner is a foreign firm, as opposed to a foreign government. In addition, Cructchley, Guo, and Hansen (1991) find out that both the Japanese and the US market produce positive reaction when there is international cooperation anno uncement between firms from these two countries. Doukas and Travlos (1988) discover that US MNCs gain the most when they announce acquisitions in less developed countries. It is also verified that multinationals not already operating in the targets country benefit from their announcement acquisitions. Next in Australia, Janakiramanan, Lamba Seneviratne (2005) provided evidence that domestic and international JV in Australia brings positive abnormal return over a two-day announcement period. In India however, FDI announcements will bring significant positive impact to Indian MNCs in the short period. In the longer period, negative abnormal return will occur to both Indian Chinese MNCs, and it was statistically insignificant to Indian acquirers but statistically significant to Chinese acquirers (Cheng, Wickramanayake Sagaram, 2003). Shapiro (1996) explains that firms will gain from these international investments activities when countries are less than perfectly correlated. T his enables firms to reduce the variability of their earnings provided they have their investments in multiple countries. Additionally, firms will be able to increase market share by expanding internationally. Firms can achieve economies of scale faster by having bigger market. It is said that such investment announcements will result in higher stock returns as it could improve firms profitability. Anyway, there are studies showed some negative reactions on international investment announcements. Malhorta and Zhu (2006) attest that international acquisition announcements made by Indian firms create significant positive short-term, yet negative impact on shareholders wealth. In US, Markides and Ittner (1990) discover that investors reaction to US firms foreign ventures with foreign firms in Canada and the UK is negative and only joint ventures with firms in Continental Europe create positive wealth effect. Besides, Gleason Mathur (1998) conclude that shareholders of US banks expe rience significant negative excess returns when banks make international acquisition announcement, especially in developed countries. In Europe moreover, Fatemi and Furtada (1988) show that Germans foreign investments announcements are taken unfavorably by the market. In Korea, Kim (2003) sums that the FDI made by Korean MNCs in developed countries may not possess competitive advantages over local competitors. Firms are more likely to gain from FDI in developing countries than in advanced economies. Therefore Korean MNCs announcement effects of FDI in advanced countries are not statistically significant, while the announcement effects in developing countries are positive and statistically significant. Then, Feils Sahoo (2000) stress that local acquisitions will only bring negative wealth effect to the shareholders, but give positive wealth effect in international acquisitions. Moeller, Schlingemann Stulz (2002) however, discover that small firms are significantly better than large firms when they make acquisition announcements. Abnormal return associated with acquisition announcements for small firms exceed the abnormal return associated with acquisition announcements for large firms. In the free cash flow theory of Jensen (1986), manager may sometimes over-invest in some unprofitable projects that will eventually diminish the value of parent firms on such foreign investments. In addition, Madura (2000) suggests that when firms expand beyond their national borders, unfamiliarity to operate within a new set of national and corporate cultures create barriers that may offset the gain a firm might obtain from international expansion. 2.4 Testable Hypothesis From the above literature reviews, it is clear that different studies pointed out different views of FDI. In this paper however, the following hypothesis is constructed: H0: There is no significant result on wealth effect of international investment announcements. H1: There is significant result on wealth effect of international investment announcements. A successful FDI will increase the firms profits and shareholders wealth. Thus in this paper, the wealth effect of international investments announcements will be tested for the purpose. CHAPTER 3 RESEARCH METHODOLOGY The research method follows specifically with the literature review. Firstly, information and journals related are obtained using available sources like the library and internet. Then, data is collected from sample. Finally, data is analyzed and determinants are developed. 3.1 Literature Review Plenty of previous researches study on the impacts of foreign investment announcements on stock returns. It is assumed that market capital is sufficient and thus the price of securities is implicit and instantly adjusted to the public release of new information. Therefore, it is worthy to look into the wealth effect of international investment announcements for which the importance have been described in previous chapters. 3.2 Research Approach Deductive approach is performed in the research. First and foremost, hypothesis was developed. Then, a research strategy was designed to test the hypothesis. In this case, historical data will be used to test the particular hypothesis. 3.3 Research Method The research is carried out using quantitative method. Secondary data is used, which are share prices in Kuala Lumpur Stock Exchange (KLSE). The data is showed in quantitative form for the purpose of the study. The result calculated is used to determine the wealth effect of foreign direct investment announcements. 3.4 Data Collection and Sampling Stock prices of all MNCs are collected from KLSE. In the context, prices during the period of foreign investment announcements made are used for the purpose. Targeted period of the stock prices is 15 days before and after the announcements, which is 31 days all together. Historical two years of daily stock prices before 15 days of announcements also required for calculation of beta and alpha. Data needed is from 1999 to 2003 as the sample MNCs are from the year 2002. 3.5 Data Calculation The standard event-study methodology is used in this research to assess the impact of foreign investment announcements. The method is based on market model describe by Fama (1976). It is predicted in the model that a firms normal or expected return given the market return and the firm historical relationship to the market. For each firm, the following model is estimated: E= + + Where : E = Expected return on the security of firm I at time t; = return on the market portfolio at time t, proxied by the return on the KLCI and = parameters of the relationship between the return on the individual security and that of the market = residual of the relationship at time t The parameter alpha () and beta () are estimated for each security i over the period of two years prior to the announcement of the foreign investments. These parameters are then used to calculate the expected returns over the test period. The difference between the actual returns () and the exp ected returns for each day and for each firm are called abnormal returns ( ) and are calculated as follows: = ( + ) Here and are the estimated parameters a and b of firm i. The abnormal returns (AR) of each company stock are determined over the event period of 31 days (t = -15 to t = +15). On average, the expected abnormal returns are zero if announcements of direct foreign investments have no impact on stock prices. Besides, all of the firms abnormal return observations are cumulated to draw overall inferences for the event of interest. Average effects of the announcement are examined rather than study each firm separately, as other events are occurring and averaging across all firms should minimize the effect of these other events (Haugen 2001). For sample of N firms, a daily average abnormal return (AR) for each day t is obtained: = Then, to find out if there is an impact of foreign investment announcements on stock returns, which will produce a significant average daily abnormal return, the student t test statistic on any day t in the event window for all n stocks is created. t-statistic = ARt /  Ãƒâ€šÃ‚ ³ARt Where:  Ãƒâ€šÃ‚ ³Art = standard deviation of average abnormal return over the event period of ( t = -15 to t =+15) The expected returns and abnormal returns once the foreign investments announcements are made could be found by using these formulas. The daily average abnormal returns for all the sample stocks surrounding the announcements date should be statistically significant if there is an impact on the announcements. Significant figure on the t-statistic implies foreign investments announcements create market reaction, either positive or negative. CHAPTER 4 RESULTS AND FINDINGS 4.1 Overall Samples Table 4.1 and 4.2 show the average daily abnormal returns and the t-statistic value of the total of 39 samples of foreign investment announcements for the period -5 to +5 days. The data is separated into two main categories: main board (Table4.1) and second board (Table 4.2) in Kuala Lumpur Stock Exchange (KLSE). In table 4.1, the average daily abnormal returns on the announcement date is -0.00611 with t-value of -0.9957. Although it shows negative AAR; however, t-statistic value shows insignificant result of international investment announcements. Therefore, there is no significant result on wealth effect of international investments announcements for main board firms. Similarly for second board firms, there is no significant result due to t-value of 1.2448 on the declaration day; although the AAR shows positive returns of 0.015827. Nevertheless, the t-value is significant for main board firms one day before the announcements, which is 2.31657 (5% significant). It shows posi tive significant result (AAR = 0.01422) for main board firm on FDI announcements one day before the declarations. Table 4.3 and 4.4 show cumulative average daily abnormal returns and the t-statistic value of the total of 39 samples of foreign investment announcements for the period -5 to +5 days, for main and second board in KLSE. On the announcement date, table 4.3 shows positive significant result of 10% (t-value = 1.89556, CAR = 0.00994) on the announcement date of the foreign investments announcements by main board. Also, it shows 1% significant positive reactions one day before and after the announcement date, where t-value day-1 = 3.06119 (CAR = 0.01605), and t-value day+1 = 3.2631(CAR = 0.01711). Here, it is clear that international investment announcements create wealth for shareholders in main board firms as the capital size is larger compared with second board firms in KLSE. Next, according to table 4.4, there is positive result on second board firms of international investment announcements, with CAR of 0.06207 on the announcement date. However, the result is not significant as the t-value is only 1.118655 on the declaration day. In short, based on the results shown, international investment announcements create positive significant wealth effect for main board firms in KLSE. For second board firms however, the market does not react directly towards the foreign investment announcements. Table 4.1: Abnormal Returns for Main Board Firms around the Announcement Period Day Average AAR(MB) t-statistic -5 0.00430206 0.700734111 -4 0.000349879 0.056989531 -3 -0.004640331 -0.755832834 -2 -0.000652968 -0.106357667 -1 0.014222296 **2.316575605 0 -0.006113253 -0.99574731 1 0.007172176 1.168228197 2 -0.010167319 -1.656087215 3 -0.004847547 -0.789584843 4 0.001572231 0.256090239 5 0.005137838 0.836868386 Table 4.2: Abnormal Returns for Second Board Firms around the Announcement Period Day Average AAR(SB) t-statistic -5 -0.002991129 -0.235249704 -4 0.009798002 0.770604441 -3 0.015774312 1.240636036 -2 -0.011074279 -0.870982463 -1 -0.011236461 -0.883737983 0 0.015827438 1.244814334 1 -0.004076424 -0.320607209 2 0.006470196 0.508875316 3 -0.006550335 -0.51517817 4 -0.006590779 -0.518359104 5 -0.01347014 -1.059414881 Table 4.3: Cumulative Abnormal Returns for Main Board Firms around the Announcement Period Day Average CAR(MB) t-statistic -5 0.006775798 1.291961568 -4 0.007125678 1.358674105 -3 0.002485346 0.473888332 -2 0.001832378 0.349384942 -1 0.016054674 ***3.061192428 0 0.009941421 *1.895560275 1 0.017113597 ***3.263100347 2 0.006946278 1.324467437 3 0.002098731 0.400171211 4 0.003670961 0.699953107 5 0.008808799 1.679599939 Table 4.4: Cumulative Abnormal Returns for Second Board Firms around the Announcement Period Day Average CAR(SB) t-statistic -5 -0.044180765 -0.796216099 -4 0.059356685 1.069713206 -3 -0.027703464 -0.499265768 -2 0.056520099 1.018592874 -1 -0.044377754 -0.799766181 0 0.062072397 1.118655164 1 -0.033324767 -0.60057166 2 0.088021262 1.586299954 3 -0.04795838 -0.864295447 4 0.07506993 1.352893868 5 -0.068604031 -1.236366844 * Significant at 10% ** Significant at 5% *** Significant at 1% CHAPTER 5 DISCUSSIONS AND CONCLUSION 5.1 Discussions This research focuses on the analysis of wealth effect of international investment announcements in developing countries, specifically Malaysia. As the result shown, the abnormal return of main board securities shows significant positive result surrounding the announcement period. The result is consistent with the research done by Bany and Fauzias (2006) which proved that the abnormal return of the securities are significantly positive around the declaration date. It implies that the unexpected cross border investment announcements do contain new relevant information and market does react on it. Also, investors generally respond favorably to the foreign investment efforts of Malaysia firms listed at KLSE. This result is also consistent with Etabari (1993), Crutchchley et. al (1991), and Lummer and McConnell (1990). As the market responds positively towards Malaysia main board MNCs foreign investment announcements, there must be reasons for this phenomenon. One of the reasons is according to a report presented by David Qian (1997), which studied on Singapores multinational investments. David Qian (1997) say that Singapore is a small open economy, where the market becomes saturated as the economy matures. Competition among firms will be intensified and thus firms will go abroad to search for new market and opportunities in order to maintain competitiveness. Bala (1998) also suggests that market saturation will become predictable when industries slowly approaching the maturity stage. Thus, firms strategy to invest overseas seems appropriate as it may help firm to improve competitiveness and profitability. Investors therefore, will predict positive sign on this type of announcements. Another point is regarding the investors perception on the ability of firms to perform in foreign investments. As main board is always meant for more established companies and second board for relatively smaller companies; investors perceive main board firms to have higher ab ility in handling overseas investments. As stated in Annual PNS Entrepreneurs Gathering PWTC (2001), one of the quantitative requirements of main board firms is an uninterrupted profit record of 3 or 5 years RM30 million aggregate profit after tax; but only an uninterrupted profit record of 3 or 5 years RM12 million aggregate profit after tax for second board. Here, the larger capital size of main board firms makes the market to be more confident and optimistic on overseas investments announced by main board firms rather than second board. Investors anticipate the share price to have positive respond around the declaration and thus they will act based on their expectation. Similarly, the result shows that there is no significant wealth effect on second board international investment announcements. It implies that there is no market reaction due to the announcements of second board firms investments overseas. Market thinks that there will be no positive or negative effect on inter national investments by second board firms. Thus, they will do nothing on the announcements. Moreover, it also implies that there is no new information contained in the announcements. The trend may be explained by Madura (2000) that when firms expand beyond their national borders, unfamiliarity to operate within a new set of national and corporate cultures create barriers that may offset the gain a firm might obtain from international expansion. Investors perceive that to invest for such announcements are risky. 5.2 Conclusion This study is to determine the wealth effect of international investment announcements in developing market. The market reaction followed by international investment announcements made was tested using the historical share price from KLSE (1999-2003). The result shows that there is positive significant result of main board firms foreign investment announcements, with a significant level of 10% on the announcement day. However, there is no significant effect on the shareholders wealth for second board firms announcements. The result is consistent with the hypothesis proposed, where there is significant result on wealth effect of international investment announcements. H0 is rejected and H1 is accepted. In short, Malaysian MNCs international investment announcements create shareholders wealth confirming the findings of Bany and Fauzias (2006). Anyway, it is only true for main board firms but not the second board. 5.3 Recommendations In general, this study enhances the literature of market reaction on Malaysia stock market by examining on the foreign investment announcements. Also, this paper verifies previous foreign investment studies, which have found that such firms cross border investments create favorable wealth effects. In fact, this study generates plenty of interesting issues to be addressed in the future. Firstly, this study can be extended to examine the abnormal return based on the level of development of the target country. For example, Ueng et. al. (2000), Doukas Travlos (1988), and Bany Fauzias (2006) proved that the foreign investments in developed countries generate higher positive returns for their shareholder than those investments into developing countries. Furthermore, a study can also be conducted to examine if the abnormal return formed based on the announcements by Malaysia MNCs which may be related to the relative strength of Malaysia currency (RM). Model study included Mathur, Rangan, Chachi, and Sundaram (1994) which find that a decline in the value of the US dollar is associated with more favorable abnormal returns to foreign investors to pursue US investments. The decline in US dollar lowers the cost of investments to foreign investors, and therefore the foreign investments is perceived to be positive as lower cost guarantees higher returns. The same theory can be applied to Malaysia, where a relatively stronger currency of RM compared with other country enables local investors to gain more and vice versa. Next, a study to determine the preferable mode of entry of international investments (Joint Venture, acquisition, or Greenfield) can be constructed. There are a number of studies focus on a particular mode of entry, like Etabari (1993), McConnell and Nantell (1985), Mohanram Nanda (1998), and Lummer and McConnell (1990) verify a positive significant result on the abnormal return based on international Joint Venture investments. There are few rese arches that look into the most preferred mode of entry for direct foreign investments. Therefore, this kind of study will help international investors to figure out the most beneficial mode of overseas investments.